Tax Watch: Condos catch property-tax break

Different assessment rule means big savings for owners

Feb. 9, 2013

Owner Penni Kessler is photographed with her dog, Remi, in their condominium Feb. 5 in Mamaroneck. Property-tax breaks are granted to the owners of condos in New York, which allows them to pay as little as one-third the taxes paid by the owners of single-family houses. Mamaroneck is undergoing revaluations this year, which could change the law to tax condos as if they were single-family homes. / Tania Savayan/The Journal News

CONDO

To best understand the substantial property-tax breaks granted condominium owners in New York, consider two homes in downtown Scarsdale, both worth about $1 million.

Software engineer Bruce Wells owns a single-family home on a quarter-acre at 40 Chase Road with a full-market value of $971,401, village records show. He pays close to $21,000 a year in county, village and school taxes.

A block away, John and Marjorie Beyersdorf own a two-bedroom condominium at 1 Christie Place that they bought in 2009 for $1.3 million. But the condo’s “full market value” on which taxes are levied is just $362,372. The Beyersdorfs’ 2012 tax bill came to about $7,600 — about one-third of what Wells paid.

“I don’t mind them paying a little less at Christie Place because you have to be over 55 to live there, and they don’t have kids for the schools,” Wells said. “But paying one-third of what I pay is beyond the pale.”

The discrepancy between what Wells and the Beyersdorfs pay in taxes sheds light on one of the state’s biggest property-tax breaks — one available in 29 of the Lower Hudson Valley’s 36 cities and towns, a Tax Watch analysis by The Journal News found. As a result, condo assessments in those communities are anywhere from 25 percent to 70 percent of the properties’ actual market value.

As the debate over the fairest method of taxation continues, two more municipalities, Mamaroneck and Scarsdale, are considering changing their rules to level the playing field between condos and single-family homes.

Condos' popularity

The tax break is well known to condo owners, and to builders who have found a growing market for such units in an area where homeowners increasingly are squeezed by high property taxes.

Condo owners have title to their units, owning the interiors of their apartments and a fraction of the development’s land and common areas. Unlike co-operative apartments, in which owners buy shares in a corporation, condo owners get a deed to their property and are taxed individually by municipalities.

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Condos are an increasingly popular form of homeownership in the region, with 41,432 condos in Westchester, Putnam and Rockland counties in 2011, up 28 percent since 2000, state records show. They make up about 8 percent of the area’s housing units.

The property-tax system is based on the proposition that one’s real estate holdings get taxed equally, based on a percentage of the value of the real estate. According to New York law, however, condos are assessed for property-tax purposes as if they were rental units.

High-priced units, like those in Scarsdale, tend to be assessed as a lower percentage of their market value because assessors can’t find comparable rentals, Scarsdale assessor Nanette Albanese said.

The statute, dating to the 1980s, also empowers condo associations like the one at Christie Place to seek even lower assessments through the tax-grievance process.

Single-family homes, meanwhile, are taxed on their fair market value — what they’d fetch in the open market. They pay taxes on the full value of their homes and end up subsidizing the condo owners who get the break.

'Homestead' option

A few municipalities in the region have adopted what’s called the “homestead” option, which lets their assessors value condominiums like single-family homes. The change means about 19 percent of the region’s condos pay at least some of their taxes based on the market value of their units. They include Southeast in Putnam, Rye town and Pelham in Westchester and four of Rockland’s five towns: Orangetown, Stony Point, Haverstraw and Clarkstown.

But the provision applies only to municipal and school taxes. For it to apply to county taxes, all of the towns in a county would have to be “homestead” adopters. So all condo owners still get a county tax break.

County taxes make up about 10 percent of the tax bill in Rockland towns. Being taxed as a rental apartment for county purposes saved 7,280 Rockland condo owners $1.7 million — about $232 per unit, according to a Tax Watch analysis of property-tax records. Those savings had to be picked up by the towns’ remaining taxpayers.

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A municipality can adopt the homestead provision only when it undergoes a communitywide revaluation of its property, which most Westchester municipalities have not done for decades. Two Westchester municipalities, Scarsdale and Mamaroneck, will complete their revaluations in 2013, and both must decide whether to make the switch.

Mamaroneck Supervisor Nancy Seligson said she wants the Town Board to resolve the matter by the end of February so disclosure notices on new values can be sent out in March. The Mamaroneck Town Board is expected to vote on the issue Feb. 27, Town Administrator Stephen Altieri said.

Scarsdale will begin its discussion in October.

On Monday, Seligson and the Mamaroneck Town Board met with officials in the villages of Larchmont and Mamaroneck, which will face their own decisions over the homestead issue in relation to their village taxes.

In Mamaroneck, about 600 of the town’s 1,000 condos would qualify for homestead status, Altieri said. That includes the 90-unit development known as Sweetwater that opened at 225 Stanley Ave. in 2008 with a hotel-style lobby, marble bathrooms, a rooftop garden and a fitness center.

Thomas Hall and Penni Kessler, a technical product manager at a software development company, bought their Sweetwater two-bedroom unit in 2009 for $575,242, land records show. Kessler thinks she could sell her apartment for about $550,000 today. She pays taxes on the unit as if its full market value were $205,402, about 36 percent of the purchase price, with her taxes about $3,700 a year.

She says the low taxes at Sweetwater were factored into the decision to buy their Mamaroneck home. Assessments at Sweetwater have dropped 18 percent since they were built in 2008, according to the 2011 tax-grievance settlement.

“We were considering townhomes, but the taxes were three to four times as high — as much as $14,000 a year,” she said. “But our space is smaller. We didn’t want to be house-rich and cash-poor.”

In Scarsdale, John Beyersdorf downsized to his Christie Place condo from a single-family home on Fairview Road, which carried a tax bill of about $18,000. The Morgan Stanley stockbroker said it was the convenience, not the lower taxes, that motivated his move. He likes the building’s elevator and maintenance staff to shovel the sidewalk, his apartment’s single-floor layout and its proximity to downtown.

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“It had to do with our age, and in terms of what your needs are when you get older,” he said. “The matter of taxes takes a second place.”

Incentive to own

Ken Finger, general counsel to the Westchester Co-op and Condominium Council, said the tax break was intended to give an incentive to tenants to move into homeownership.

“If they didn’t have the tax benefit, many young couples and families would not be able to move from living in small apartments to ownership housing,” he said. “By allowing housing of this sort, it makes this an affordable bridge between an apartment and a single-family home.”

But resistance to condos — and their tax benefits — is growing. In New Castle, the Summit/Greenfield development team at the former Reader’s Digest site was met by howls of protest from former Supervisor Mark Tulis when it proposed putting up 111 condos. Tulis argued that the town would be shorted tax revenue if all the units remained in condo ownership. To resolve litigation on the project, Summit/Greenfield agreed that the 60 townhomes would be treated as single-family homes for tax purposes, while 51 would remain condos.

“If it looks like a house, barks like a house and quacks like a house, it should be taxed as a house,” Tulis said. “It has nothing to do with affordability. It has to do with builders making more money. If your taxes are less, you can get more money for a unit.”

But Kessler, the secretary of Sweetwater’s condo board, argues condos deserve to be assessed differently than single-family homes because she also pays a monthly maintenance fee of about $600, has no land or driveway and has to share her hallway and common space, which get heavy use from the condo’s owners.